CSRA's CEO Larry Prior believes that the recent round of mergers and acquisitions in the government market is a "prelude" to the next round of consolidation.
Nearly all of the large consolidation deals among publicly traded government services companies over the past two years have prioritized scale and reach as agencies’ budgets shrunk and their buying habits changed.
Among the public companies, Leidos announced “the big one” in January 2016 through its take over of Lockheed Martin’s IT segment to double in size. That deal announcement came in the midst of CACI International’s purchase of the former L-3 National Security Solutions, SAIC’s acquisition of Scitor and Engility’s buy of TASC. All three transactions added intelligence community work for the buyer.
There is also the complex two-part transaction that saw the now-former Computer Sciences Corp. U.S. government business combine with SRA International to form CSRA in November 2015. At nearly $5 billion in annual revenue, CSRA sits well below Leidos but next to Booz Allen Hamilton and above the $4 billion players SAIC and CACI.
CSRA CEO Larry Prior told a Northern Virginia Technology Council breakfast event Friday morning his company’s creation had many of the same goals as the other deals: scale, cost synergies, more market channels and others. And other companies are set to follow in the path of CSRA and its peers, he said.
“That is (all) prelude to the next phase of consolidation in our marketplace to achieve the scale and variety of ways to get that competitive advantage. We’ve done a bit of that ourselves at CSRA,” Prior said.
This year has seen one such move already as KeyW Holdings closed its purchase of Sotera Defense Solutions earlier this month to become an almost pure-play intelligence community contractor.
Global engineering services company KBR also increased its government services footprint last year through its almost $870 million in of Wyle and the former Honeywell Technology Solutions business. KBR subsequently formed a government services segment and expects it to record $2.5 billion in annual revenue at around 41 percent of total corporate sales.
For CSRA’s part, a second definition of scale is found in the company’s partnerships with other technology makers and service providers. Those collaborations help CSRA leverage investments to help the company implement technologies for agencies, Prior said.
CSRA counts seven technology vendors as strategic alliance partners: Amazon Web Services, Cisco, Microsoft, Oracle, Salesforce, SAP and ServiceNow. Twenty-eight other companies are deemed key alliance partners that Prior said CSRA works with on a “day-by-day basis.” At least 100 small businesses also work with CSRA.
“Scale by company is matched by scale by region. Together we’re smarter than any one of us. Together we’re stronger than any one company,” Prior said.